The objectives of this unit are to:
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acquaint you with the concept of corporate strategy; familiarize you with the various generic corporate strategies; explain the nature, scope and approaches to implementation of stability and growth strategies; and finally discuss the rationale for adopting these strategies.
9.1 9.2 9.3 9.4 9.5 9.6 9.7 9.8 9.9 9.10 9.11 Introduction Nature and Scope of Corporate Strategies Nature of Stability Strategy Expansion Strategies Expansion through Intensification Expansion through Integration International Expansion Summary Key Words Self-Assessment Questions References and Further Readings
Strategic management deals with the issues, concepts, theories approaches and action choices related to an organization’s interaction with the external environment. Strategy, in general, refers to how a given objective will be achieved. Strategy, therefore, is mainly concerned with the relationships between ends and means, that is, between the results we seek and the resources at our disposal. For the most part, strategy is concerned with deploying the resources at your disposal whereas tactics is concerned with employing them. Together, strategy and tactics bridge the gap between ends and means. Some organizations are groups of different business and functional units, each of them must be having its own set of goals, which may not necessarily be same as the goals of the corporate headquarters looking after the interests of the entire organization. Since the goals are different and the means to achieve them are different, strategies are likely to be different. This understanding has led to the hierarchical division of strategy at two levels: a business-level (competitive) strategy and a company-wide strategy (corporate strategy) (Porter, 1987). In addition to these strategies, many authors also mention functional strategies, practiced by the functional units of a business unit, as another level of strategy. Corporate Strategies: These are concerned with the broad, long-term questions of “what businesses are we in, and what do we want to do with these businesses?” The corporate strategy sets the overall direction the organization will follow. It matters
Corporate Level Strategy
whether a firm is engaged in one or several businesses. This will influence the overall strategic direction, what corporate strategy is followed, and how that strategy is implemented and managed. Corporate strategies vary from drastic retrenchment through aggressive growth. Top management need to carefully assess the environment before choosing the fundamental strategies the organization will use to achieve the corporate objectives. Competitive Strategies: Those decisions that determine how the firm will compete in a specific business or industry. This involves deciding how the company will compete within each line of business or strategic business unit (SBU). Competitive strategies include being a low-cost leader, differentiator, or focuser. Formulating a specific competitive strategy requires understanding the competitive forces that determine how intense the competitive forces are and how best to compete. Functional Strategies: Also called operational strategies, are the short-term (less than one year), goal-directed decisions and actions of the organization’s various functional departments. These are more localized and shorter-horizon strategies and deal with how each functional area and unit will carry out its functional activities to be effective and maximize resource productivity. Functional strategies identify the basic courses of action that each functional department in a strategic business unit will pursue to contribute to the attainment of its goals. In a nutshell, corporate-level strategy identifies the portfolio of businesses that in total will comprise the corporation and the ways in which...